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Title An alternative to reduce the Individual Income Tax Burden Caused by Inflation: A review on Indexation

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    257
  • Date
    2007-05-16
Many taxpayers pay an increasing share of their incomes for income tax due to the high rates of inflation in the current tax system. This paper analyzes one proposal often suggested as a remedy to this situation: indexing the individual income tax for inflation. It also compares the effects of indexation with the effects of the discretionary tax policy such as changes in deduction, tax credit, and tax rates which Korean government has often employed to reduce the income tax burden. As a result of the comparison, it is found that the indexation is more efficient than the discretionary tax policy. Therefore, it would be necessary to discuss about introduction the indexation in the tax system.
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